Hudson City Bancorp to be acquired for $3.7 billion

Paramus-based Hudson City Bancorp Inc. today agreed to merge into a subsidiary of Buffalo, N.Y.-based M&T Bank Corp. for $3.7 billion, giving M&T the fourth largest-deposit share in New Jersey through Hudson City's 97 branch offices in the state.

"Hudson City recently embarked on a diversification of our product lines and our balance sheet. This transaction accelerates that transformation," Hudson City Chairman and CEO Ronald E. Hermance Jr. said in a statement. "As we combine Hudson City's attractive retail network with M&T's full service commercial banking suite, our stakeholders will participate in the growth of one of the nation's strongest and most successful banking franchises."

In a conference call this morning, Hermance said Hudson City first considered a merger during the recession, which had “really challenged our business model.”

“The central question was, ‘What will our customers want in the years to come?’ and we realized our customers want exactly the type of resources and services that will come from this merger,” Hermance said. “This will give our customers just what they want, but much, much faster — and we’ll be guided by people who are already doing these things extremely well.”

Under the merger agreement, Hudson City shareholders will choose to receive approximately $7.22 per M&T share in either stock or cash, for up to a total consideration of 60 percent M&T stock and 40 percent cash. Based on M&T’s closing price Friday at $85.87 per share, the transaction is valued at about $3.7 billion.

M&T expects to gain a total of $25 billion in deposits and $28 billion in loans from Hudson City’s 135 branch offices in New Jersey, New York and Connecticut, which will merge into a combined banking network of 870 locations stretching from Connecticut to Virginia.

“We never focused on growing out our franchise from a geographical perspective. However, in this case, the geographical fit works quite well, with very little (branch) overlap,” M&T Chairman and CEO Robert G. Wilmers said in the conference call. “We’ve had no full-service community banks in New Jersey, but we’ve long had a presence in New York City, and our commercial bankers have been active in the New Jersey marketplace for a number of years now. We’ve had some level of success, but we believe a strong branch presence is a key component of commercial banking, and Hudson City offers that.”

According to Rene Jones, chief financial officer for M&T, expanding those services across Hudson City’s existing branches will lead the company to hire more than 100 commercial lenders over a “relatively modest transition period … with low integration risk.”

Wilmers said the firm has completed 23 mergers and acquisitions over the past 25 years, noting that growth strategy “offers the best chance for us to create value for our shareholders, and we found such a partner again in Hudson City.”

M&T expects to repay about $13 billion of Hudson City’s long-term borrowings by liquidating its comparably sized investment portfolio upon the deal’s completion.

Both firms’ boards of directors have approved the deal, though it is still subject to their shareholders’ approval and regulatory approvals. If the merger is approved, Hermance will become an M&T board member.